EU to take legal steps against fake Greek data

Amid financial and political turmoil, Greece now also faces accusations from the European Commission that figures on the country's public debt are unreliable and belie the country's true debt burden.

Adding to Greece's economic woes, an EU source said today (13 January) that the European Commission was likely to take legal steps against Athens over its unreliable reporting of its public debt and budget deficit in October.

EU legal steps

The European Union, investors and trade unions piled pressure on Greece as it struggled to raise funds amid concerns about its huge debt burden and deficit.

"There will probably be another infringement procedure [...] because providing timely and reliable statistics is an obligation under EU law and they have failed in their obligation," the EU source said.

Olli Rehn, the European Union's economic and monetary affairs commissioner-designate, told an approval hearing in the European Parliament on Monday that Greece's fiscal woes were very serious but did not yet threaten the euro zone (EurActiv 12/01/10).

Tumbling debt rating

Greece paid a high premium to borrow 1.6 billion euros ($2.34 bln) from financial markets, while bank shares fell the most in a month and the cost of insuring its bonds rose, hit by an EU document that cast doubt on its reporting of statistics.

The country has been pounded by successive downgrades of its debt rating, and Tuesday's auction was the first test of how easy it will be for Athens to continue to fund its deficit and debt without international aid.

The European Commission said in a report on Monday that past Greek deficit and debt figures could be revised further as the current institutional setup for Greek statistics was seen as ineffective and prone to political interference.

Political spillover

The new socialist government is also under pressure domestically, and the civil servants' union announced a one-day strike on 10 February to protest against any austerity measures.

The socialists, who won the October elections promising to tax the rich and help the poor, will present a plan to the EU by early next week on how they plan to cut the deficit from 12.7% of GDP in 2009 to under 3% in three years.

Labour Minister Andreas Loverdos said cash is so low in parts of his ministry that he would run out of money to pay unemployment benefits this week.

City analysts in London and journalistic observers in Paris and Frankfurt already appear to have drawn the conclusion that it is only a matter of time before Greece defaults. Although the prime minister, the EU, the European Central Bank and the IMF keep on denying such a scenario, the spectre of default keeps returning and is starting to form its own reality, writes Jens Bastian, senior economic research fellow for South Eastern Europe at ELIAMEP, in an exclusive op-ed for EurActiv.

Greece's economic crisis resembles in many ways Argentina's in the early 2000s. However, should the Greeks follow the Argentine model they will be far less likely to repay their official debt, argues Daniel Gros.

The EU should prepare for the possibility of the default or defection from the euro zone of some of its members, something which if prepared correctly would not cause a financial crisis and would allow the countries concerned to escape the vicious cycle of austerity and recession, argues George Soros.

Christine Lagarde faces a difficult balancing act between helping to resolve the eurozone crisis, where she has been deeply involved, and addressing potential crises in the developing world, argues Raghuram Rajan.

Greek Finance Minister Yanis Varoufakis has criticised Greece's creditors for making "no concessions" and turning the negotiations "into a war". In an interview with Germany's Tagesspiegel he explains why a plan for debt restructuring is a Greek prerequisite for an agreement.

Just as Europe was talking about bailouts a year ago, it is now moving into 'restructuring' territory. But a year from now not even that will have been enough and the new order of the day will be the dreaded D-word: default, writes Jens Bastian, visiting fellow for the political economy of Southeast Europe at St. Antony’s College in Oxford, England in an exclusive op-ed for EurActiv.

The achievement of only a third of the vote by Greece's traditional conservative and socialist ruling parties marks the end of the old political order, an electoral revolution which could spread to other European countries if the crisis continues, argues Yiannis Roubatis.

Greece is more likely to stay in the eurozone than go as other countries do not want their banks to go under due to an early Grexit. Their motivation will be negative rather than inspired by a desire to achieve further integration as a means of strengthening Europe. But a positive attitude can only be expected if voters start to realise it is better for their national interests if they put European interests first, says Andy Langenkamp.